Syria’s Unreported Energy War – Part Two

As part of the previous article, reductions in fuel and electricity supplies in Syria were described as reaching ”a breaking point.” Shortly after the last article came out, the situation hit that breaking point.1.Volume 3, Issue 1 : The Week in Review For over a week, the country was paralysed as a bout of cold weather hit while supplies of diesel and gasoline started running out. Black market prices soared, factories stopped working and images from Syria’s major cities of lines of cars kilometres long waiting for gasoline went viral on social media. The immediate situation was relieved by February 13 as new shipments of fuel started to arrive,2.Promises to improve electricity after the arrival of 136 thousand tons of oil to the Syrian ports : Enab Baladi but the underlying problems still exist.

Shortages and rationing had already been a problem in Syria before the Islamic State (IS) overran the gas fields in Homs this past December.3.Volume 3, Issue 1 : The Week in Review Domestic fuel supply issues became more acute after the fall of Palmyra, increasing electricity rationing up to 20 hours a day in some areas and forcing black market prices of gasoline and diesel to increase.4.Volume 3, Issue 1 : The Week in Review While electricity rationing had seen a marked increase in December and January, gasoline and diesel rationing mostly held steady until late January. Difficulties in the supply of gasoline and diesel received little attention, though the warning signs where present.

Refugees who fled the Iraqi city of Mosul due to the fighting between government forces and Islamic State (IS) group jihadists, queue for heating fuel at the UN-run al-Hol refugee camp in Syria’s Hasakeh province, on January 29, 2017. / AFP PHOTO / DELIL SOULEIMAN

The Iranian loan discussed above provides Syria with funds to import enough oil for two and a half months. After that, Syria will need a new injection of funds to stave off further shortages. In light of this, Syria may take several measures to extend energy stockpiles; for instance, shifting electricity generation to fuel oil as opposed to natural gas. This is because Syria lacks the means to import liquid natural gas (LNG), which is used for electricity generation, in large quantities. Syria may also attempt to shift some remaining domestic gas production to fill cooking gas needs as importing LPG for cooking gas would be costly and inefficient. This would be an attempt to reduce and stabilise prices which have impacted the civilian populace.

While this will increase fuel oil demands, the government may try to lower oil demand and push down import costs to private actors. To lower demand, ration levels are unlikely to reach the levels they were at in the Autumn, however a new normal will be established between current ration levels and the Autumn levels. This is most likely to occur with diesel and gasoline rations, which could allow the government to stretch out the funds to import fuel.

The recent government decision to let industrialists, and later the agriculture industry, import diesel directly from Lebanon and push much of Syria’s diesel importation costs down was significant. While this is arguably a prudent move by the government, it is one that should have been taken sooner. Due to this measure, future fuel supply issues are unlikely to be as severe as the February crisis because private actors with means will be able to provide for themselves. However, this won’t solve all of Syria’s diesel needs if government imports dry up, nor will it solve fuel demands. This will also cause foreign currency to bleed out of Syria at a faster pace, which will increase pressure on the already poorly-performing SYP.

Comments, primarily from Prime Minister Khamis and Minister Ali Ghanem, have repeatedly mentioned plans to increase domestic production of oil and gas.46.Al Watan They have commented on plans to revitalise and restart production in the Homs fields once they are liberated from IS, stating that this would happen soon. While bringing any more domestic production online will be important, and effort should be put toward doing so, Syrians should not be expecting large production increases from the Homs fields. Besides destroying the Hayyan gas processing plant, IS has been destroying remaining infrastructure in anticipation of future government advances.47.https://twitter.com/ahmadalissa/status/83079749207367270648.https://twitter.com/QalaatAlMudiq/status/83400115348243661349.https://twitter.com/QalaatAlMudiq/status/83364614664401715250.https://twitter.com/QalaatAlMudiq/status/833444267209158656 The full extent of the destruction is not yet known, but repairs and development are likely to take a long time even in the best of circumstances. Further, the tightness of the current situation makes remaining domestic energy assets crucial. This was highlighted when IS shelling of the Ebla gas processing plant, which was noted in the last issue to be “dangerously close to the front lines”, temporarily cut off 65% of Syria’s electricity generation capacity.51.Darkness envelops Damascus because 65% of the power-station’s generating capacity is out : Aliqtisadi52.http://tishreen.news.sy/?p=7610353.Electricity System announces increased rationing hours “significantly” : Enab Baladi

While the above measures will allow Syria to move forward, Syria will eventually need further aid from its allies to finance its basic needs. Perhaps more importantly, Syria needs a larger economic intervention to prevent the continuing deterioration of the economy. Wars are not only fought on the battlefield; Syria’s allies should start paying deeper attention to the needs of the home front as well.

This is part two of a three part series on the war for oil and gas on Syria’s home front – read part one here